Stocks close lower as investors eye inflation data, White House meeting on debt ceiling: Live updates

Redburn says investors should consider buying shares of Spotify, a '"winner of the AI disruption" reshaping every industry.

To be sure, AI poses some major threats to copyright owners and music labels, and Redburn expects many of these names to suffer share loses as some countries look to lessen copyright laws to foster innovation.

But, for Spotify, the opportunities seem to outweigh the drawbacks, according to analyst Agnieszka Pustula. She expects the company to coordinate with "labels to identify infringements while simultaneously looking for ways to employ AI to augment (independent) artists' creativity."

"With regard to Spotify, we see more opportunities than threats," Pustula added. "Fragmentation of the music market reduces its reliance on the dominant music labels and opens opportunities for Spotify to act as an aggregator of independent content for licensing to AI developers."

— Samantha Subin

Star hedge fund manager David Einhorn unveiled his new idea at the Sohn Investment Conference Tuesday, and it's German auto parts supplier Vitesco Technologies.

"Vitesco is a European mid cap and is essentially an orphan equity," Einhorn of Greenlight Capital said at the virtual conference. "It operates about 50 locations around the world and employs 38,000 people globally. I'm bullish."

The longtime investor said Vitesco, which trades in Germany, is arguably the lowest multiple auto parts supplier in the world.

— Yun Li

With the trading day more than halfway over, it's shaping up to be another low-volume day on Wall Street.

The SPDR S&P 500 ETF Trust (SPY), which tracks the broad S&P 500 index, has so far traded less than a third of its 30-day average volume. The SPY has thus far traded 24.18 million shares. That's well below its 30-day average volume of 76.1 million.

Monday was also a low-volume day, with the SPY trading just 50.04 million shares. That was its lowest-volume day since Nov. 25, when it traded just 30,545,430 shares. That was also a half-day on Wall Street as it followed the Thanksgiving holiday.

— Alex Harring

Artificial intelligence improvements could revolutionize Microsoft's business and double the company's cloud revenue, according to Bernstein.

"While it is too early to model the full impact of this transformation on Microsoft's financials, the revenue opportunities being created are very large and the upside for revenue, earnings, and [free cash flow] will be substantial," said analyst Mark Moerdler.

Read how Bernstein breaks down those projections here.

— Samantha Subin

Signals watched by chart watchers say the stock market climate is growing more positive, according to Bank of America technical research strategist Stephen Suttmeier. The S&P 500 might drop to 4048-4039 in May, he said, but has solid support at 3970 and 3800.

Alternatively, if stocks rallied above 4195, a "fear of missing out rally" could push the S&P 500 to 4325 and, longer term, the S&P 500 might even climb as high as 4600-4900 in February-March 2024, the report noted. "Bullish signals from the Golden Cross, Net Tab, Farrell Sentiment, the weekly global advance-decline line, NYSE breadth thrust and the cross above the 12-month moving average (MA)," were cited in the Tuesday report.

Investors are preoccupied by the narrowness of this year's market advance, but are ignoring the number of stocks rising in the S&P 500 versus the number falling in price, or the so-called "advance-decline line, which is positioned to breakout from a big base," BofA said.

"Breadth is not bearish," Suttmeier believes. "Depending on the indicator, market breadth is stabilizing to positive."

— Scott Schnipper, Michael Bloom

Walmart will post "a solid set of results" next week, according to UBS.

Analyst Michael Lasser had a buy rating on Walmart, saying the company "likely maintained its momentum and gained further share" in its first quarter. His 12-month price target of $170 suggests shares can climb 11% from Monday's close. The stock is up 7% this year. Walmart is set to release earnings results May 18.

"The narrative around WMT is that not only is it a bastion of safety in this otherwise uncertain world, but it is also a company that is capitalizing on its myriad emerging opportunities as it adapts to a digital landscape," Lasser wrote to clients on Monday. "In our view, the company's 1Q results will largely support these views."

He expects the big-box retailer benefitted from inflation as shoppers traded down from other stores, even as Walmart spent more on wages and technology.

"All in, we believe consensus estimates are likely to move higher after this print, which should continue to support the stock," Lasser added. "As we see it, WMT should be a core holding and the stock deserves a premium multiple."

— Sarah Min

Valuation concerns are leading Atlantic Equities to move to sidelines on shares of Shopify.

Analyst Kunaal Malde downgraded the e-commerce stock to a neutral rating, citing Shopify's expensive valuation despite a slowdown in growth.

"After a strong run, valuation now puts on the sidelines," he wrote in a Tuesday note to clients. "There are still strong growth prospects ahead for this best-in-class product execution business, but both absolute and relative valuations are challenging."

Malde highlighted the company's gross multiple trading at pre-pandemic levels despite lower growth among the biggest reasons for the downgrade. He lifted his price target on shares to $65, implying rangebound movement from Monday's close.

The stock's gained nearly 82% so far this year.

— Samantha Subin

Home Depot and Lowe's are both set to report their first quarter earnings later this month and Wall Street is expecting weakness in their results.

Goldman Sachs is projecting same-store sales of -1% for Home Depot and -4% for Lowe's. Meanwhile, Wells Fargo has lowered its expectations to -2% and -2.5%, respectively, while JPMorgan has lowered forecasts to -3.5% and -2%, respectively.

Goldman analyst Kate McShane highlighted recent vendor sales results, noting that "unfavorable weather delayed the start of the spring selling season, although trends appear to have improved in April." Additionally, "higher interest rates, inflation, and weaker consumer confidence remain a demand headwind."

However, there's still a long-term bull case in the retail stocks, according to Wells Fargo.

"Despite muddled NT trends, we believe the issues plaguing HD/LOW today are more cyclical than structural, w/ ample room for LT multiple expansion once peaking rates normalize and a fundamental trough becomes evident," Wells Fargo analyst Zachary Fadem said in a note Tuesday.

— Tanaya Macheel

Bank of America technical strategist Stephen Suttmeier noted that, while many investors are concerned about only a few stocks leading the market higher this year, a look under the surface tells another story.

"Investors believe that US equity market rally is narrow, but they are not paying attention to the SPX A-D line, which is positioned to breakout from a big base," Suttmeier wrote. "Although this A-D line hit a new high in August, which we viewed as bullish, the SPX could not sustain a rally beyond its 200-day MA and then fell to new cyclical bear market lows in September and October."

A rising advance-decline line points to more stocks rising than declining, which is generally seen as a bullish sign for the market.

— Fred Imbert, Michael Bloom

Raymond James is reiterating its strong buy rating on shares of Palantir after solid quarterly results boosted shares more than 23% on Tuesday.

The print showed revenues grow 18% year over year, with the company topping Wall Street's expectations on both the top and bottom lines. CEO Alex Karp said that Palantir expects to remain profitable through year end.

"All in, profitability and growth opportunities are pacing ahead of expectations and models will be biased higher," wrote analyst Brian Gesuale in a Monday note to clients. "With positive cash flow, sustainable profitability, expectations that appear reasonable, and ~18% of the market cap in cash we are reiterating our outlier Strong Buy rating and our Street high price target of $15."

The target implies 94% upside from Monday's close. Shares have earned 28% so far this year.

Among his reasons for liking the stock, Gesuale highlighted the company's artificial intelligence platform, situated to offer "transformational value to customers."

"While it's early, PLTR is describing 'unprecedented' demand for AIP, is in a land grab situation, and believe it's years ahead of the competition," he wrote. "A user conference in early June should give an on the ground read of managements enthusiasm."

— Samantha Subin

Goldman Sachs remains bullish on ConocoPhillips, following the energy company's first-quarter earnings report that topped the firm's expectations.

"We view the stock as advantaged among our US Major coverage, where we remain Buy-rated on COP, with 26% total return vs our Neutral ratings on both XOM/CVX with ~14% total return," analyst Neil Mehta wrote in a Monday note.

"We [also] remain constructive on COP's commitment to shareholder returns, where the company reiterated its 2023 commitment on the recent earnings call (2023 expected capital returns yield of ~9%)," Mehta continued.

The firm's price target of $122 implies almost 21% upside from Monday's close.

— Hakyung Kim

Jefferies says specialty plumbing and appliances distributor Ferguson is a high-quality business "poised to take [market] share."

The firm upgraded Ferguson to buy from hold. Its new price target of $181 implies shares rallying 28% from Monday's close. 

"FERG is uniquely positioned to service compared to smaller competitors due to its scale & breadth of products," analyst Philip Ng wrote in a Tuesday note. "FERG should be resilient in a downturn, driven by its pricing power, high variable cost structure and capital light model. FERG's pricing power & limited exposure to commodity products drive stable gross margins through the cycle."

CNBC Pro subscribers can read more about his upgrade here.

— Hakyung Kim

These are some of the stocks making the biggest moves midday:

• Palantir – Palantir shares popped nearly 20% after the software company beat first-quarter estimates and said it anticipates full-year profitability. CEO Alex Karp said that the company's seeing strong demand for its new artificial intelligence platform.
• 3D Systems — Shares dropped 10.2% after the 3D printer maker reported weak first-quarter earnings. 3D systems reported an adjusted loss of 9 per share on revenue of $121 million, while analysts polled by Refinitiv expected a loss of 7 cents per share and revenue of $128 million. The firm also reaffirmed full-year revenue guidance and raised its full-year adjusted EBITDA expectations, while cutting 6% of its workforce.
• Novavax — The biotechnology stock surged 44% on news of promising vaccine data and a major cost-cutting initiative that includes broad layoffs.
• Skyworks Solutions -- Shares slid about 6% it posted weaker-than-expected fiscal third-quarter guidance. The semiconductor firm forecasts non-GAAP per-share earnings of around $1.67, lower than consensus estimates of $2.06, according to StreetAccount.

See the full list here.

— Alex Harring

When off-price retailers TJX, Burlington Stores and Ross Stores report earnings later this month, investors will be focused on a number of data points amid the choppy macro environment — including inconsistent traffic trends, weather-related impacts from the from the delayed spring selling season and headwinds from smaller government payments to lower-income consumers, Goldman Sachs wrote in a note Monday.

"On balance, we see a mixed setup into 1Q. We expect healthy ongoing performance at TJX, with our EPS estimate modestly ahead of consensus at the company's 1Q guide," analyst Brooke Roach said. "That said, we expect a choppier result for ROST and BURL, with 1Q results largely in line with the company's guidance range and providing limited upside for margin-driven outperformance of the stock."

While TJX's earnings results may outperform its counterparts, Roach has a neutral rating on TJX and buy ratings on Burlington and Ross Stores.

"We continue to believe that ROST and BURL have significant opportunity for execution-led upside over the next few quarters as normalizing freight and supply chain headwinds, combined with leverage from sequentially improving sales, can help drive margin recovery," she wrote.

TJX is down about 1% so far this year, while Burlington has dropped nearly 13% and Ross Stores has lost about 11%.

— Michelle Fox

Skyworks was down more than 5% after its earnings report, putting the stock on pace for its worse day since October.

The semiconductor stock was down 5.7%. It last performed worse on Oct. 7, 2022, when shares finished 5.8% lower.

Skyworks reported second-quarter earnings that were in line with Wall Street expectations and revenue that beat the Street's consensus estimate, according to StreetAccount. But the company issued weak guidance for its fiscal third quarter, prompting the drawdown. Guidance for both revenue and non-GAAP earnings per share was lower than analysts had forecasted.

The drop weighed on the VanEck Semiconductor ETF (SMH), which is down more than 1.5%.

— Alex Harring, Gina Francolla

Regional bank stocks retreated again on Tuesday, but trading in the sector was relatively calm after big swings in recent sessions.

Shares of PacWest were down by about 5.4% in midday trading. Western Alliance fell 3.8%.

The SPDR S&P Regional Banking ETF (KRE) slipped 1.6% and is now down more than 13% since the start of May.

— Jesse Pound

BMO Capital Markets analyst Ambrish Srivastava lowered his rating on Skyworks Solutions shares to market perform from outperform. He also reduced his price target to $100 from $140, implying 4.9% downside from where shares closed on Monday.

The downgrade comes after the chipmaker issued weaker-than-expected fiscal third-quarter guidance. The stock dropped more than 5% on Tuesday.

CNBC Pro subscribers can read about the downgrade here.

— Hakyung Kim

The Federal Reserve's increases to interest rates will need more time to work through the economy before inflation abates to a 2% target, according to New York Fed President John Williams.

"Because of the lag between policy actions and their effects, it will take time for the [Federal Open Market Committee's] actions to restore balance to the economy and return inflation to our 2% target," Williams said at the Economic Club of New York on Tuesday.

Williams didn't give any forward guidance as to what the central bank might do at the next FOMC meeting. His remarks did little to move markets in either direction, with all three major indexes still trading lower midday. The Dow Jones Industrial Average lost 75 points, or 0.2%, while the S&P 500 and Nasdaq were trading 0.4% and 0.6% lower, respectively.

— Brian Evans, Jeff Cox

Investors worried about the debt ceiling should hedge their positions through vehicles that track the Cboe Volatility Index, according to Steve Sosnick, chief strategist at Interactive Brokers.

The strategist said the Cboe Volatility Index, a popular measure of volatility on Wall Street, remains low even amid worries that a failure to raise the U.S. debt ceiling could spell a crisis ahead. However, Sosnick said that could quickly change, pointing out that the VIX spiked to 21 last week. The VIX was last at about 17.5 on Tuesday, after rising 0.59 points.

"Volatility right now is not expensive, and volatility could get expensive very quickly, sometimes more quickly than you can purchase it," Sosnick said during a Tuesday appearance on CNBC's "Squawk on the Street." "And so that's one of the things that I think investors should be considering right now if they are concerned about these debt talks."

— Sarah Min

A deal to raise the debt ceiling isn't likely to be brokered out of the meeting between U.S. House Speaker Kevin McCarthy and President Joe Biden slated for Tuesday afternoon, according to Evercore ISI.

Analyst Tobin Marcus said that because both sides have yet to show signs of yielding on their respective positions, raising the debt limit may only come as the so-called "X date" gets closer.

"The worst case for markets, and unfortunately perhaps the most likely outcome, is that we will see no real movement at all," Marcus said. "Democrats are still digging in, even as it looks increasingly unrealistic to us that Republicans will fold and accept a clean increase. In this case, the staring match will continue until we get closer to the brink, with no one blinking yet."

— Brian Evans

JPMorgan analyst Alexei Gogolev initiated coverage on digital banking software company Alkami with an overweight rating and a $15 price target, which implies shares gaining 21.4% from Monday's close.

"Alkami runs a 100% cloud-based, multi-tenant and single code-hosted platform, which ensures substantial advantages vs. peers. With Alkami's 96% subscription in revenues, 97% gross retention rate and 115% net dollar retention, the company has a high level of visibility into top-line growth (projected 3Y CAGR of 25%)," Gogolev wrote in a Tuesday note. 

"With $0.24B in [average recurring revenue] Alkami is a relatively small player, but the company appears to have been gaining share and displacing legacy banking solution providers," he continued. 

Shares fell 2.6% in early trading.

— Hakyung Kim

The Dow fell about 76 points at the open, while the S&P 500 and Nasdaq dipped around 0.4% each.

— Fred Imbert

Shares of Shoals Technologies soared almost 19% Tuesday during premarket trading, following its quarterly earnings report and an upgrade to buy from Guggenheim.

"SHLS delivered Q1 results that exceeded our estimates, notably at the gross margin line. It appears that the company is benefiting more than we expected as revenue shifts to combine-as-you-go products, and we also believe that falling material prices are having an impact," Osha wrote in a Tuesday note.

CNBC Pro subscribers can read more about the upgrade here.

— Hakyung Kim

Check out the companies making headlines before the bell:

• Palantir Technologies — Shares of Palantir rose nearly 20% after the enterprise computing firm best known for its data mining platforms released first-quarter results that beat analyst estimates. The company also issued guidance for full-year profitability. CEO Alex Karp said demand for the company's artificial intelligence platform is "without precedent."
• 3D Systems — 3D Systems dropped 9.8% after posting disappointing first-quarter results. The maker of 3D printers reported an adjusted loss of 9 per share on revenue of $121 million. Analysts had forecasted a per-share loss of 7 cents on revenue of $128 million, per Refinitiv. Additionally, the firm cut 6% of its workforce. It also reaffirmed full-year revenue guidance, though it raised its full-year adjusted EBITDA forecast. Jeffrey Graves, president and CEO of 3D Systems, said the results are due to "continued softness in our dental orthodontic market, which we attribute to reported sluggishness in consumer discretionary spending." 
• Skyworks Solutions — Skyworks Solutions shed more than 9% after issuing weaker-than-expected fiscal third-quarter guidance. The semiconductor firm forecasts non-GAAP per-share earnings of around $1.67, lower than consensus estimates of $2.06, according to StreetAccount. It also expects revenue of $1.05 billion and $1.09 billion, while analysts were expecting guidance to come in at $1.15 billion. Otherwise, the firm reported second-quarter earnings that were in line with expectations, while revenue beat, according to StreetAccount.

Read the full list here.

— Sarah Min

Small businesses aren't getting any more optimistic about their prospects, with worries persisting over the available labor pool and inflation.

The National Federation of Independent Business Optimism Index for April registered a reading of 89, 1.1 points below the March level and missing the Dow Jones estimate for 89.8. It also was the 16th straight month of falling below the long-term average of 98.

Labor quality was the listed as the top concern by 24% of respondents, while inflation came in a close second at 23%.

"Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions," said NFIB Chief Economist Bill Dunkelberg. "Inflation remains a top concern for small businesses but is showing signs of easing."

—Jeff Cox

Hong Kong's Hang Seng index dropped 2% in Asia's afternoon session, with healthcare and basic materials leading declines.

Technology stocks listed in Hong Kong fell roughly 3%, Refinitiv data showed.

China's largest chipmaker SMIC, or Semiconductor Manufacturing International Co. plunged by 7.6% ahead of its first quarter earnings slated for release later this week.

Shenzhou International Group Holdings also saw losses of more than 5.5%, Alibaba Health Information Technology fell 5.3% and WuXi Biologics fell 4.86%.

– Jihye Lee

European markets opened muted Tuesday, as U.K. financial markets reopened after a public holiday.

The pan-European Stoxx 600 index was down 0.1%, with sectors spread across marginal gains and losses.

Auto stocks led the pack with a 0.6% uptick, while oil and gas and utilities both dropped 0.5%.

— Hannah Ward-Glenton

China's exports grew 8.5% year-on-year in April, marking a second-straight month of growth after the economy saw a surprise jump of 14.8% in March, government data showed. Imports fell by 7.9% for the month.

Economists polled by Reuters estimated exports would rise 8% in April, while imports were forecast to remain unchanged after declining by 1.4% year-on-year in the previous month.

China's trade surplus rose to $90.21 billion, up from the surplus of $88.2 billion in March. A Reuters poll predicted a surplus of $74.3 billion for the month.

– Jihye Lee

Bank of Japan governor Kazuo Ueda said there is no pre-set idea on how its planned policy review will affect the central bank's future monetary policy decisions.

Ueda was referring to the announcement by the BOJ after its first monetary policy meeting, where the bank announced that it "decided to conduct a broad-perspective review" of its easing measures.

Ueda reportedly told parliament that "we will take necessary policy steps at each of our rate reviews, with an eye on financial and price developments, even while we conduct the review."

Ueda has maintained the current BOJ policy, but is expected to gradually roll back the ultra-dovish policy of his predecessor Haruhiko Kuroda.

The Japanese yen weakened marginally to 135.13 against the U.S. dollar on Tuesday morning.

— Lim Hui Jie

Australia's retail trade fell 0.6% in the first quarter of this year compared to the fourth quarter of 2022, government data showed Tuesday.

The decline marked a second straight month of contraction and was in line with estimates seen in a Reuters poll of economists.

The seasonally adjusted turnover in volume stood at AU$96.2 billion for the quarter.

The Australian dollar traded at marginally weaker levels at 0.6778 against the U.S. dollar.

– Jihye Lee

Taiwan's trade surplus surged to $6.71 billion, its highest level since October 2020 as exports from the island fell less than expected for April, government data showed Tuesday.

Exports fell 13.3% year-on-year to $35.96 billion, lower than a Reuters poll of economists expecting a 18.5% decline. Meanwhile, imports fell even further by 20.2% to $29.25 billion, widely unchanged from the decline of 20.1% seen in the previous month.

Taiwan's ministry of finance revealed that in April, exports to its major trading partners all fell except to Japan.

Exports to Japan grew by 19.8%, while exports to mainland China and Hong Kong saw the largest fall at a decline of 22%.

Imports from its major trading partners also fell, with imports from the ASEAN region leading losses and falling 26.1% year-on-year.

— Lim Hui Jie

Never mind the scorching hot yields on short-term Treasurys, particularly as debt ceiling chatter heats up. Investors may want to look at longer duration issues instead, said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

"The guidance has been for a while to extend duration," she said, noting that she understands why investors might be more inclined to chase 5% yields in Treasury bills or certificates of deposit as opposed to holding a five-year bond.

"Historically, once the Fed is past the peak in tightening, which we think is likely, intermediate-term bonds – that 5-to-7-year maturity bucket – tend to outperform on a total return basis after the peak is reached," she said.

Jones added, "They may face reinvestment risk if they are in something that isn't at least locking in some of this yield for the next three to five years."

Even with rates as attractive as they are now, investors should know that these Treasury yields alone won't keep pace with inflation over the long term. Be sure to keep your portfolio diversified.

-Darla Mercado

Treasury Secretary Janet Yellen indicated on CNBC's "Closing Bell: Overtime" that federal officials are not close to any major policy changes to help stop the slide for regional bank stocks, such as a targeted ban on short-selling.

"This is something that has rarely been used, and when it has been used ... it is not clear that it made things better," Yellen said about banning short-selling, pointing out that such a decision would be under the purview of the Securities and Exchange Commission.

"Short-selling, more broadly, the bar is pretty high to put controls on that," Yellen added.

Yellen also said that the Treasury Department is reviewing an FDIC report on potential expansion of deposit insurance and would be willing to work with Congress on any changes.

The SPDR Regional Banking ETF (KRE) fell 2% on Monday and is now down nearly 12% for the month. Yellen said the most recent declines for stocks of regional lenders is not indicative the balance sheets of the banks.

"There are some pressures on stock prices, but our banking system is well-capitalized," Yellen said.

— Jesse Pound

These are some of the stocks making the biggest moves after hours:

• Lucid — The electric vehicle maker shed 8% after the company posted growing losses in the first quarter but said it has enough cash to continue operating into next year.
• Palantir — The software stock soared 22% after Palantir beat analysts' expectations for the first quarter and issued upbeat guidance. The company also gave a strong outlook for full-year profitability.
• PayPal — Shares slid about 5.5%. PayPal issued weak current-quarter expectations for earnings per share, while raising its full-year guidance for the metric. Separately, the digital payments company beat expectations on top and bottom lines for the first quarter, according to Refinitiv.

See the full list here.

— Alex Harring

Futures tied to the Dow and S&P 500 were both little changed shortly after 6 p.m. ET.

Futures tied to the Nasdaq 100 slipped 0.2%.

— Alex Harring